Licensing Software: What Does That Mean? 

A software license is essentially a binding agreement that’s made between the user and the developer or owner of the program. It outlines how the product can be used and distributed, whether a standard application or a software monetization solution. Generally, these documents define and outline the responsibilities of all parties involved to ensure the protection and prevention of the company from copyright infringement. Some of the concerns that the license addresses are:

  • If users can look into the source code of the software.
  • Whether they can copy, redistribute, or alter the program. 
  • Where the application can be used and the frequency of installation. 

Importance of software licensing

Before software is used, it needs to be licensed legally. Otherwise, it could potentially be considered a copyright law breach to make use of it. For businesses, understanding what licensing software is all about is essential because you could pay a considerable amount of money for copyright infringement or spend on licenses for programs you’re not currently using. Moreover, agreements in licensing software can help with the process of managing the software the organization operates.

How it works

Through licensing, developers and software companies maintain ownership and control of their products as the license holders. They determine and dictate its terms of use and distribution, pick the organizations that may utilize it, and continue selling it as they wish. These binding contracts will always be enforceable so long as they’re clearly defined and that all parties mutually agree on it from the time the users have made the payment to when they begin to utilize the software. 

Types of licensing software

Most organizations keep their software licenses within text documentation and contractually limit the claims of users against developers. Additionally, the licenses may have restrictions on specific end-user rights like liabilities, warranties, and installations. They can usually be found on the website of the owners or developers. The agreements for most software typically fall into two distinct categories:

  • Proprietary licenses. These are licenses that limit the legal ability of users to make changes to the code of the program. A considerable segment of licenses falls into this category since the majority of licenses for commercial software restrict access. They also present developers with the most protection.
  • Free or open-source software. FOSS agreements are contracts that permit end-users to use, reuse, modify, and share the source code of the software product. Unlike proprietary licenses, they give users a considerable level of authority when it comes to the use of the software. For this reason, many companies prefer to acquire software from those that offer FOSS licensing over those with proprietary counterparts.


Ultimately, companies license their software to ensure their rights remain protected and that they can meet the provisions and requirements of the law. They’re also there to ensure no misunderstandings between licensees and licensors happen. With agreements that licenses hold, they prevent and safeguard the software’s misuse so that the programs are utilized as intended.